Working Paper: CEPR ID: DP12794
Authors: Laura Alfaro; Manuel Garcés-Antona; Enrique Moral-Benito
Abstract: We consider the real effects of bank lending shocks and how they permeate the economy through buyer-supplier linkages. We combine administrative data on all firms in Spain with a matched bank-firm-loan dataset on the universe of corporate loans for 2003-2013 to identify bank-specific shocks for each year using methods from the matched employer-employee literature. Combining firm-specific measures of upstream and downstream exposure, we construct firm-specific exogenous credit supply shocks and estimate their direct and indirect effects on real activity. Credit supply shocks have sizable direct and downstream propagation effects on investment and output throughout the period but no significant impact on employment during the expansion period. Downstream propagation effects are comparable or even larger in magnitude than direct effects. The results corroborate the importance of network effects in quantifying the real effects of credit shocks and show that real effects vary during booms and contractions.
Keywords: bank-lending channel; employment; investment; output; matched employer-employee; input-output linkages
JEL Codes: E44; G21; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bank credit supply shocks (E51) | investment growth (E20) |
| bank credit supply shocks (E51) | output growth (O40) |
| bank credit supply shocks (E51) | employment growth (O49) |
| downstream exposure (Q52) | employment growth (O49) |
| downstream exposure (Q52) | output growth (O40) |
| downstream exposure (Q52) | investment growth (E20) |
| credit supply shocks (E51) | real effects (E65) |